For Landlords: Forfeiture of a Lease
Forfeiture is a process by which a landlord can end a lease early if the tenant is in breach of any of its obligations or if certain events have occurred. If the right to forfeit the lease is exercised by the landlord, the landlord can recover possession of the property.
Practically, the Landlord reserves the right to terminate the tenancy by the insertion of a forfeiture clause, also known as a “right of re-entry”. However, If a tenant is in breach of a covenant in its lease and the landlord accepts rent whilst being aware of that breach, then the landlord may have waived its right to forfeit the lease for that breach. To amount to a waiver, the rent must have:
- Accrued since the landlord became aware of the forfeiture event.
- Been offered and accepted as rent by the landlord.
The test is: did the landlord’s actions amount to recognition of the continued existence of the lease and the landlord and tenant relationship? Acceptance of rent would indicate that the landlord wishes the lease to continue and he is stopped by law from asserting otherwise.
If the breach is a continuing one (such as parting with possession), then a right to forfeit accrues each day the breach continues. The circumstances should be assessed on a case-by case basis.
In a recent case, the acceptance of a second instalment of service charge was also held to amount to a waiver of the right o forfeit where service charge has been reserved as rent under the lease.
Consequently, it is strongly recommended that once a landlord has been made aware of a breach, it should not accept any sums from the tenant until it has obtained specialist legal advice.
The GL Commercial Property Team have experience in acting for landlords in the context of commercial property transactions and contentious proceedings involving property. We have a great deal of experience in ensuring that every reasonable step is taken to protect your interests.